"The benefits of proceeding with this major
technological and logistical undertaking are still uncertain. There
is limited evidence of how much and for how long British consumers’
behaviour might change, and costs could escalate.
"Large-scale projects of this kind can take on a
momentum of their own and so, along the way, there should be clear
decision points at which the Department will need to review costs
to consumers, benefits and risks and judge whether to carry on as
originally planned or significantly change direction."
Amyas Morse, head of the National Audit
Office, 30 June 2011
There are major risks the Department of Energy
and Climate Change must address to achieve value for money from its
£11.3 billion national programme to install ‘smart’ electricity and
gas meters in all homes and smaller non-domestic premises in Great
Britain from 2014 to 2019, according to a report by the National
Audit Office.
Smart meters provide consumers with detailed
information on their energy use and can enable energy
suppliers to provide a wider range of off-peak tariffs as well as
allowing suppliers to collect meter readings remotely. The
Department expects them to be an important step towards ‘smart
grids’, which may help to manage demand across the electricity
system.
The NAO’s early assessment of the programme
concludes that the Department has made progress in developing its
approach in the early phase, which cost £11.2 million. However, in
this phase, it did not demonstrate full value for money, because
its early planning and budgeting were insufficient to support clear
monitoring and accountability. The Department is strengthening
programme management.
The cost of installing smart meters in every
home and smaller non-domestic premise and the associated
communications technology will be borne by energy suppliers. The
Department expects suppliers to pass the costs and efficiency
savings on to their customers. The estimate by the Department of
the total cost of the programme – currently £11.3 billion -
includes some provision for cost escalation. But uncertainties
remain, and the Department still has to develop a specification for
the central data and communications system.
The Department estimates the economic benefits
at £18.6 billion between 2011 and 2030 (achieving a discounted net
benefit of £7.3 billion). However, today’s report identifies
uncertainty, based on the evidence available so far, about the
extent to which smart meters will result in changed energy use by
consumers over a sustained period. The Department has still to
develop its benefits realisation plans and consumer engagement
strategy.
Other risks that the NAO has highlighted are
that there is very little contingency time to address the risk that
design approvals, procurement and testing take longer than planned;
that the system will have to be flexible enough to minimize the
risk of future obsolescence; and that the Department has more work
to do before roll-out starts on the security of the system.
Publication details:
HC: 1091, 2010-2012
ISBN: 9780102969757